AEMO’s 2017 Gas Statement of Opportunities Report (GSOO), intended to assess the adequacy of gas infrastructure, reserves and resources to meet demand in eastern and south-eastern Australia to 2036, outlines that gas producers have forecast annual production to decline by 122 PJ, from 600 PJ in 2017 to 478 PJ in 2021.
Based on this information, AEMO advises additional production will be required to meet the needs for GPG and residential, commercial and industrial gas consumers.
“At a time when LNG export is dominating demand and supply of gas in eastern states, strategic national planning of gas development has never been more critical for maintaining domestic energy supply adequacy across both gas and electricity sectors,” said AEMO Chief Operating Officer Mike Cleary.
This tightening of the domestic gas market will have flow-on effects to the electricity sector unless there is an increase in gas supplies and development.
Without this development to support GPG, modelling suggests average electricity supply shortfalls of between approximately 80 gigawatt hours (GWh) and 363 GWh may be experienced in 2018-19 and 2020-21.
The scale of these shortfalls would breach the reliability standard which aims to supply at least 99.998 per cent of electricity demand.
Alternatively, if GPG gas requirements are supplied, then gas shortfalls of between 10 PJ/a and 54 PJ/a are projected in the residential, commercial, and/or industrial sectors from 2019 to 2024 in New South Wales, Victoria and South Australia.
“The 2017 GSOO highlights the increasing interdependencies between gas and electricity, and supply and demand, and the need for the Australian energy industry to have a holistic “single energy view” to ensure long-term planning is carried out in the interests of consumers,” said Mr Cleary.
“Gas and electricity markets can no longer be viewed in isolation, as the overall convergence of energy markets in eastern and south-eastern Australia demands a single energy view from a national perspective. It requires holistic planning across the entire supply chain to enable investment decisions to be made in the long-term interests of consumers.”
In the short term, AEMO has identified a range of potential industry responses that could mitigate both electricity and gas supply shortfalls, however notes that these responses rely on appropriate market signals, and may be impacted by considerations such as the retirement of coal-fired generators, and the direction of energy policy such as the existing moratoria on various gas developments across eastern Australia.
“Energy supply shortfalls could be mitigated in the short term by an increase in coal-fired generation and renewable energy output, combined with an uptake in technologies such as battery storage, together with increased gas production and the possibility of LNG exporters redirecting a small portion of their gas production to the domestic market,” said Mr Cleary.
“Gas producers have told us that there is potential scope to increase production from existing fields if incentivised, although the size of the increase is unknown and new fields may also need to be developed to meet projected demand.”
The long-term outlook identifies that early investment in exploration and development programs will be needed to bring uncertain and undiscovered resources to market in time to meet forecast increases in demand for gas.
Up to 5,500 PJ of additional production will need to be developed to meet projected demand post 2030, although AEMO acknowledges that climate change policy, and emerging new technologies will influence future demand for GPG and the energy supply mix.